BT Q1 Profit Up, Revenue Flat

LONDON -- BT announces its first quarter results to June 30, 2003.

FIRST QUARTER HIGHLIGHTS

Chief Executive’s statement

Ben Verwaayen, Chief Executive, said:

“Our focus on financial discipline, defending our core business and creating new business streams continues to deliver results. I am pleased to report earnings per share* growth of 64 per cent on flat revenues, free cash flow of £618 million and net debt reduced below £9 billion.

"The group reached another key milestone early, achieving one million broadband connections in June. This was also a further record quarter for the corporate order book and the group continues to deliver efficiency savings throughout the business.”

Table 1: BT Group's results for the first quarter to June 30, 2003 (before goodwill amortisation and exceptional items)

Total earnings per share and profit before tax, after goodwill amortisation and exceptional items, for the first quarter are 4.1 pence (2002 – 3.2 pence) and £498 million (2002 – £384 million) respectively.

The results in the table above and the commentary focus on the results before goodwill amortisation and exceptional items.

Group turnover was flat year on year at £4,586 million in the first quarter. This performance represents an improvement on the 1 per cent underlying decline in turnover in the fourth quarter of last year. The 3 per cent decline in the group’s core business was offset by the 23 per cent growth in new wave revenues. The consumer sector has shown continued growth although revenue from SME’s declined.

Group operating profit before goodwill amortisation at £730 million for the quarter was £160 million higher than the first quarter of last year. Leaver costs of £11 million were £145 million lower than the first quarter of last year and further operational efficiencies have resulted in cost savings across the lines of business. These savings were partly offset by increased pension costs, wage inflation, higher national insurance rates and the continued investment in new wave activities. Group operating profit margin increased to 15.9 per cent (12.4 per cent last year) and excluding leaver costs was 16.2 per cent (15.8 per cent last year).

BT’s share of associates and joint ventures operating losses before goodwill amortisation was £3 million in the quarter (£49 million profit last year) with the reduction due to the disposal of our stake in Cegetel in January 2003.

Net interest payable was £225 million for the quarter, an improvement of £75 million against last year as a result of the reduction in the level of net debt.

The above factors resulted in the group achieving a profit before taxation, goodwill amortisation and exceptional items of £502 million in the quarter, an increase of 56 per cent.

The taxation charge was £153 million for the quarter on the profit before goodwill amortisation and exceptional items, an effective rate of 30.5 per cent (33.2 per cent last year). The lower effective tax rate partially reflects reduced overseas losses for which relief is not available.

Earnings per share before goodwill amortisation and exceptional items were 4.1 pence for the first quarter (2.5 pence last year), an increase of 64 per cent. Earnings per share after goodwill amortisation and exceptional items were 4.1 pence compared to 3.2 pence last year, an increase of 28 per cent.

British Telecommunications plc (BT)